A district in California can issue tax-exempt bonds to prepay for electricity that it plans to provide to an authority made up of a group of municipalities without triggering certain arbitrage restrictions, the Internal Revenue Service concluded in a recently published private-letter ruling.

The ruling, which was dated April 2 but not publicly released until Monday, does not identify the parties involved. But Carol Lew, a shareholder at Stradling Yocca Carlson & Rauth in Newport Beach, Calif., who serves as bond counsel for the Kings River Conservation District in Fresno, said the ruling applies to the district and the San Joaquin Valley Power Authority, and is important because it may encourage other municipalities in California to follow suit.

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